Taping Rule

If a broker dealer hires a certain number of employees that have come from disciplined firms (i.e. expelled from membership by a regulator) is required to tape all calls with existing and potential clients.

The threshold at which a firm needs to tape record calls depends on the total number of registered reps and the number of disciplined reps hired. There is a table provided under FINRA 3010. For example, for a firm with 20 or more registered reps, if 20% of those reps come from disciplined firms, the taping rule must be implemented.

Knowing this table is not as important as knowing the implementation process:

Once a firm crosses the threshold, it has 60 days to begin taping. However, it can avoid the requirement if, within 30 days, it reduces head count of disciplined reps so it is back below the threshold. If the firm is unable to reduce head-count within 30 days, it will now need to implement taping within 30 days, as the first 30 days of the 60 day period were spent trying to reduce headcount.

For example, if a firm crosses the threshold on March 1, it has until March 31 (30 days from March 1) to reduce headcount. If it is unable to do so, it must begin taping calls by April 30 (60 days from March 1).